Pilgrim’s Pride Corp. has pointed to a “crisis” facing the US poultry industry after deciding to close a chicken processing complex and six of its 13 distribution centres in the US.
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The closures will lead to the loss of 1,100 jobs and is part of a plan to curtail losses amid record-high ingredients costs, as well as an oversupply of chicken in the US.
The US chicken industry has been coming under increasing pressure from soaring feed-ingredient costs resulting from corn-based ethanol production.
Under the plan announced today (12 March), Pilgrim’s Pride will close its chicken processing complex in Siler City, N.C., which employs around 830 people.
Pilgrim’s Pride also plans to shut down distribution centres in Iowa, Florida, Mississippi, Tennesse and Ohio.
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By GlobalDataThe closures are expected to begin immediately and will be completed by June.
Pilgrim’s Pride president and CEO Clint Rivers blamed the US government’s “ill-advised policy” to subsidise ethanol production for the soaring cost of corn.
“The cost burden is already enormous, and it’s growing even larger,” Rivers said. “Based on current commodity futures markets, our company’s total costs for corn and soybean meal to feed our flocks in fiscal 2008 would be more than $1.3 billion higher than what they were two years ago. We simply must find ways to pass along these higher costs.”
Rivers also warned that the poultry industry would have to readjust as food inflation dampened demand.
“We believe that the recent impact of food-based inflation, coupled with the need for food producers to continue to increase prices for their products, will further stimulate inflation, weaken consumer confidence and negatively affect demand for products in certain market channels. This will require that the industry adjust its production output to levels commensurate with a reduced demand, at higher and necessary prices, sufficient to sustain the industry as a whole.”
Pilgrim’s is also reviewing its other production facilities for potential mix changes, closure and consolidation in response to the trends in the industry.
Earlier this week, Pilgrim’s Pride announced that it had agreed to sell its turkey processing business to US natural and organic group Hain Celestial.
